A bad month is getting worse for U.S. and European semiconductor stocks.
While the sector has been one of the biggest casualties of the escalation of trade tensions between the U.S. and China, news on Monday that some Huawei Technologies Co. suppliers are said to have halted shipments to the Chinese company sent heavyweights Intel Corp. and Qualcomm Inc. lower in U.S. pre-market trading.
In Europe, the Stoxx 600 Technology Index fell as much as 2.5%. AMS was down as much as 13.4%, but pared some declines after saying it hasn’t suspended shipments to the Chinese company.
Infineon Technologies AG, which was reported to have halted shipments to Huawei, fell as much as 6.1%. The company said by email that it could not confirm the Nikkei Asian Review’s report and that “as of today, the great majority of products Infineon delivers to Huawei is not subject to U.S. export control law restrictions, therefore those shipments will continue.”
Today’s moves add to declines at the end of last week after the White House blacklisted Huawei and threatened to cut it off from buying U.S. products. Through Friday’s close, the Philadelphia Semiconductor Index is now down 9.9% this month, a dramatic reversal from a 12% rally in April.
Among other U.S. technology stocks, Micron Technology Inc., Skyworks Solutions Inc., Qorvo Inc., Broadcom Inc. and Analog Devices Inc. are all set to open lower. All five were highlighted by Morgan Stanley last week as stocks that may see their sales at risk from the Huawei ban.
Adding to woes for chip stocks on Monday, Morgan Stanley analysts including Joseph Moore and Craig Hettenbach wrote that semiconductor investors should reduce their positions, with a prolonged re-escalation of U.S.-China trade tensions not yet discounted by the U.S. equity market, even after recent declines.
“We continue to see very high inventories on semiconductor balance sheets and in the channel, weak end demand in nearly every semiconductor end market, a once-in-a-generation magnitude of memory oversupply, and capital spending that hasn’t adjusted enough to feel comfortable with all of that.